Business and Professional Ethics Bank Scandal

Question :

write a paper on deontological Analysis of the Bank scandal

Answer :

Despite the Board of Directors as well as senior executives, the bank involved in one of the biggest money-laundering scandals in the history of the world. The role of the Board of Directors and senior executives is in question because in their presence the illegal activity escaped scrutiny. The role of the bank in one of the biggest scandals can be seen from the ethical perspective. There are several ethical theories that could be applied to analyze the role of Danske bank. Here, the role of the bank from the deontological perspective has been analyzed.

Deontological theory is one of the theories of ethics that places significant emphasis on the relationship between the duty of people and the morality of the action of people. The deontological perspective does not consider the outcome of an action in order to determine whether the action is good or bad. Some actions in deontological ethics are considered morally good because of their characteristics but not the product of the action (Hooker & Kim, 2018). Even if the product of action is good but the characteristics of the action are not morally good, the action would not be considered as ethical action. The theory holds that at least some of the actions of people are morally obligatory irrespective of the consequences of the action for human welfare. It states that an individual should focus on his or her duty without considering the impact of his duty on others. People should perform their duty rightly at any cost and if they are not performing their duty rightly, their actions are unethical and they are not satisfying the ethical requirement of their job. 

The concept of deontological ethics can be applied to the case of Danske Bank in which duty was not performed by the management of the organization. The money-laundering scandal that took place in the Estonia branch of Danske bank should not have happened. The money-laundering scandal had not happened if the Board of Directors and senior executives would have performed their job rightly (Baumane-Vitolina et al., 2016). Apart from this, the management of the organization was also aware that the company with which it continued dealing was involved in crime. Thus, the management of the organization was also accountable for the crime because the organization continued dealing with the organization knowingly. In the case of Danske bank, neither the action nor the consequences of the action were good. The action of the organization put money of hundreds of people on stake. 

The deontology theory of ethics requires people to follow a set of rules in order to perform their duty. The management of Danske bank did not follow that set of rules while performing their duties. Thus, their action could be termed unethical. It is not necessary to judge the action of the management of Danske bank on the basis of their consequences because the action of the management to let the criminals conduct their criminal activities is not good. After seeing the action of the management, it can be said that they were not obliged to the rules set forth by the organization.  

Another point that should be considered is the action of employees who let the criminals conduct their activities could not be considered unethical because they are not the decision-makers (Ware, 2018). They are bound by the organization to perform their job. It can be better understood with an example. There is a software engineer in an organization. He came to know that a nuclear missile is going to be launched that may lead to war. The software engineer is able to hack the network in order to cancel the launch of the missile. But doing so is against the professional code of ethics. On the ethical ground, he is not allowed to break into the system without permission. Apart from this, it is also a kind of cheating and lying, if he breaks into the system without permission. Thus, his action could not be considered an unethical despite the consequences of his action. Similarly, the action of the employees of Estonia branch of Danske bank is not unethical because they are bound to do their job only without considering the consequences of their action. 

The utilitarian theory of ethics is the opposite of the deontology theory of ethics. The deontology theory of ethics focuses on the action in order to determine whether the action is ethical or unethical irrespective of the outcome of the action. But the utilitarian theory of ethics determines right from wrong considering the consequences or outcomes of the action. This theory is a form of consequentialism. The theory states that the most ethical choice is the one that leads to the greatest benefit to more people. It says that people should involve in such activities that could lead to the greatest good to a large number of people. It is the most common approach to moral reasoning (Van Dang et al., 2017). It is also widely applicable and used in business because of its stand on cost and benefits. However, there are some limitations to the utilitarian theory of ethics. For example, it advocates for greater goods for a greater number of people. It means the outcomes of the action should benefit more people. But the future is uncertain and hence it cannot be predicted that the outcome of action would be good or bad.

The theory can be applied to the case of Danske Bank's money laundering scandal in order to determine the action of the bank from an ethical point of view. It is very simple to determine good or bad of the action of the bank on the basis of the outcome of the action. The outcome of the action of the bank led to a greater loss of the greater number of people. From the utilitarian perspective of ethics, the action of the bank that let the company conduct criminal activities is unethical because of the consequences of the action. It did not lead to the welfare of the people instead the money of many people was on stake. It was the responsibility of the bank to protect the money deposited by people in the bank but the bank knowingly allowed it to happen. Thus, the action or activity of the bank could be considered unethical. Unlike the deontological theory of ethics, the utilitarian theory of ethics holds every individual involved in the scandal accountable for the loss. The management, Board of directors, senior executives as well as lower-level employees all are guilty in the eyes of the utilitarian theory of ethics because their actions led to greater loss. If they had taken the necessary steps, the scandal would not have happened and hence the money of many people could be saved (Alizadeh et al., 2019). Thus, saying that lower-level employees were bound to perform their duty only is not right. They should choose such activity that can lead to the greater good for a greater number of people.

In light of the Virtue theory of ethics, it can be said that the workers of the bank have not practiced honing virtuous habits. It shows that they are not able to make the right decision or the right choice. If they face ethical challenges, they cannot determine what is right or wrong because they do not have practiced being honest, just, brave, generous, and so on. If they had practiced, to be honest, and brave, they would have a stand against the decision of dealing with the company that had already criminal records. The workers have not developed the trait that can lead them to produce good consequences for others. Apart from this, they are also not able to fulfill their duty reliably. Therefore, it is necessary for them to practice being honest, brave, just, generous, etc. 

The virtue theory of ethics also states to focus on the character of an individual who has done something. For example, if an individual has killed a criminal, he should not be judged on the basis of the crime rather the consequences as well as the character of the individual. His act of killing the criminal could save many people (Jordan & Kristjánsson, 2017). However, his act of killing cannot be justified from the legal perspective because it is not his duty to punish someone or declare someone guilty. But on the ethical ground and in the eyes of virtue ethics, his act is an example of bravery, honesty, justice, as well as generosity towards others. Similarly, if the workers of the bank had refused to deal with the company with a criminal record, they would have judged on the basis of their character and the outcomes of their actions. It would be considered as the act of ethics because by doing so that could save the reputation of the bank and resources of the client.  

The theory of justice guarantees a just as well as morally acceptable society. The first fundamental principle of justice guarantees the right of every individual to have the most extensive basic liberty compatible with the liberty of others. On the other hand, the second fundamental principle of the theory emphasizes that economic as well as social positions are to be open to all and everyone's advantages. It gives importance to the basic value as well as goals of life and the value and goal should not be affected by self-interested wants and desires in order to benefit a particular group at the cost of others (Buchanan, 2017). The theory says that every individual should agree to the fundamental principles of the theory. 

The value and goal of the management of Danske Bank can be seen as changed or influenced by the self-interested desire and wants. As the management of the bank knowingly continued working with the company with a criminal history. The decision of the management of the bank benefited a particular group at the expense of others. The management did not adopt the fundamental principle of justice. Hence, it can be said that the decision of the management of the bank was unethical that did not ensure justice.

The illegal activity escaped the scrutiny that affected the reputation of the bank significantly. The bank was criticized by the financial regulator of Estonia. The financial regulator of Estonia said that the bank has underestimated the compliance risk. The bank has ignored the compliance that has been imposed by the regulatory bodies over the bank (Tsingou, 2018). The bank had also a problem with know-your-customer rules because the bank allowed the company with criminal activity to deal with the bank. The bank did not comply with the money laundering rules. Danske Bank failed to identify a high-risk customer. Apart from this, it also failed to detect questionable money transaction activity. The bank was charged for serious economic as well as an international crime.

The bank violated the money laundering law. The state prosecutor of Denmark filed a preliminary charge against the bank for violating the anti-money laundering act of the country. Apart from this, the prosecutor also stated that the bank failed to provide an information technology system to its human resources in order to perform sufficient monitoring of every transaction. The bank also failed to obtain adequate information related to the beneficial ownership of the account in question. Danske Bank was the biggest lender of the country that was being investigated for criminal activity. It was found that the bank was a part of a transaction of billions of Danish crowns that was a part of criminal money laundering. The money laundering act of Demark has been developed to prevent money laundering as well as financing terrorism (Nobanee & Ellili, 2018). The Estonia branch of Danske Bank completely failed to implement adequate anti-money laundering procedures. Apart from this, the parent company or Danske Bank Group also failed to recognize the issue. Danske Bank did not act upon various red flags that should have affected it to the issue of the Estonian branch. The Estonian branch of Danske Bank violated various legal obligations as it failed to implement adequate anti-money laundering processes as well as procedures. 

There were several weaknesses in the financial industry that led to one of the biggest money-laundering scandals in the history of the world. The first and foremost issue was with the regulatory system of the country. The monitoring of the suspicious transaction was not being done properly that allowed the criminal to conduct criminal activity and the bank failed to recognize it. The financial industry is exploding with non-cash transactions. The number of non-cash transactions is increasing very rapidly (Lowe, 2017). So, it is very tough to identify the suspicious transaction in the financial industry. There is a need for more advanced technology and software to monitor every transaction carefully so that suspicious transactions can be easily identified. The legacy solution was largely based on the rules. A program was running through a set of rules. If a transaction matched the determined rules, the transaction 

References 

Baumane-Vitolina, I., Cals, I., & Sumilo, E. (2016). Is ethics rational? Teleological, deontological, and virtue ethics theories reconciled in the context of traditional economic decision making. Procedia Economics and Finance, 39, 108-114.